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The Africa Growth Initiative (AGI) Markets Monitor aims to provide up-to-date financial market and foreign exchange analysis for Africa watchers with a wide range of economic, business, and financial interests in the continent. Following the May 2016 and July 2016 updates, the October 2016 update continues tracking the diverse performances of African financial and foreign exchange markets through September 30, 2016.

Authors

Research Analyst and Project Coordinator - Africa Growth Initiative

We offer our main findings on key recent events influencing the region’s economies: the recent rise of fuel and metal prices, Mozambique’s and Nigeria’s credit rating downgrades, and the fall of the Nigerian naira following the June 2016 implementation of the flexible exchange rate system.

Commodity prices continue upward trend

From January to September 2016, the International Monetary Fund’s (IMF) all commodity price index increased by 23 percent, especially bolstered by mounting fuel and metals prices, as shown in Figures 1 and 2. According to the IMF’s October 2016 World Economic Outlook, the increases in fuel prices have been driven in large part by rising natural gas prices in the U.S. (due to weather trends), surging coal prices in Australia and South Africa, and gradually increasing crude oil prices, which, after hitting a 10-year low in January 2016, have risen by 50 percent to $45 in August. On September 28, the Organization of the Petroleum Exporting Countries (OPEC) agreed to reduce crude output to between 32.5 to 33 million barrels a day, increasing spot oil prices by $2.5/bbl. A final plan outlining how much each country will cut will be decided at the next group meeting on November 30. IMF projections indicate that the oil market is expected to rebalance in 2017 as demand remains strong, and supply faces a number of uncertainties including production disruptions, changing OPEC policy, and investment in unconventional oil fields.

Meanwhile, metals—lead by tin, nickel, and zinc—have experienced a 15 percent increase in prices from January to September 2016. Although metals prices declined from 2011 to 2016 as a result of China’s slowdown in commodity-intensive investment, the recent stimulus program in China’s construction sector has provided a boost to prices.

The MSCI Emerging Frontier Markets Africa (excluding South Africa) Index fell by 2.49 percent in dollar terms over the period January to September 2016, while the MSCI Emerging Markets Index has increased by 16.29 percent (see Figure 3). Figure 4 demonstrates that the emerging markets index has performed well this year, as global central bank policies have supported the demand for riskier investments, but African markets, excluding South Africa, have been largely bypassed by this trend. Within Africa, total dollar returns were highest for South Africa (14.48 percent) and lowest for Ghana and Nigeria (-13.72 percent and -34.36 percent, respectively), while Kenya and the West African Economic and Monetary Union’s exchange (BRVM) had marginal returns. The dramatic decline in Nigeria’s index can be accounted for in large part by the major depreciation of the naira against the dollar (as reflected in its local currency returns compared to the dollar returns); similarly, South Africa’s success can be attributed to the strengthening of the rand.

Global and African regional bond spreads fall

From January to September 2016, African and global bond spreads have fallen by approximately 91 and 132 basis points, respectively (see Figure 5). African bonds now have on average yield spreads 4.46 percent above the U.S. 10-year Treasury bond rate, compared with the 3.60 percent for the global bond index. Mozambique’s bond spread remains the highest in the region as it continues to deal with the repercussions from the April 2016 revelation of its $1.4 billion in undisclosed debt, as well as macroeconomic challenges exacerbated by low commodity prices (see Figures 6 and 7).

Meanwhile, S&P downwardly revised Nigeria’s foreign credit rating from B+ (negative) to B (stable) on September 16 based on the country’s worsening fiscal and external vulnerabilities. By mid-2016 alone, Angola, Gabon, Lesotho, Mozambique, the Republic of the Congo, and Zambia all saw rating downgrades. At the same time, eurobond issuances have fallen significantly, with only Ghana and South Africa leveraging the international bond market, according to the recent World Bank Africa’s Pulse report.

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https://www.brookings.edu/wp-content/uploads/2016/10/naira_nigeria001.jpg?w=282The Africa Growth Initiative (AGI) Markets Monitor aims to provide up-to-date financial market and foreign exchange analysis for Africa watchers with a wide range of economic, business, and financial interests in the continent. Following the May 2016 and July 2016 updates, the October 2016 update continues tracking the diverse performances of African financial and foreign exchange markets through September 30, 2016.
Authors
Amadou Sy
Director - Africa Growth Initiative
Senior Fellow - Global Economy and Development Twitter @ASYBrookings A
Amy Copley
Research Analyst and Project Coordinator - Africa Growth Initiative
We offer our main findings on key recent events influencing the region’s economies: the recent rise of fuel and metal prices, Mozambique’s and Nigeria’s credit rating downgrades, and the fall of the Nigerian naira following the June 2016 implementation of the flexible exchange rate system.
Commodity prices continue upward trend
From January to September 2016, the International Monetary Fund’s (IMF) all commodity price index increased by 23 percent, especially bolstered by mounting fuel and metals prices, as shown in Figures 1 and 2. According to the IMF’s October 2016 World Economic Outlook, the increases in fuel prices have been driven in large part by rising natural gas prices in the U.S. (due to weather trends), surging coal prices in Australia and South Africa, and gradually increasing crude oil prices, which, after hitting a 10-year low in January 2016, have risen by 50 percent to $45 in August. On September 28, the Organization of the Petroleum Exporting Countries (OPEC) agreed to reduce crude output to between 32.5 to 33 million barrels a day, increasing spot oil prices by $2.5/bbl. A final plan outlining how much each country will cut will be decided at the next group meeting on November 30. IMF projections indicate that the oil market is expected to rebalance in 2017 as demand remains strong, and supply faces a number of uncertainties including production disruptions, changing OPEC policy, and investment in unconventional oil fields.
Meanwhile, metals—lead by tin, nickel, and zinc—have experienced a 15 percent increase in prices from January to September 2016. Although metals prices declined from 2011 to 2016 as a result of China’s slowdown in commodity-intensive investment, the recent stimulus program in China’s construction sector has provided a boost to prices.
African equity markets except South Africa miss emerging markets rally
The MSCI Emerging Frontier Markets Africa (excluding South Africa) Index fell by 2.49 percent in dollar terms over the period January to September 2016, while the MSCI Emerging Markets Index has increased by 16.29 percent (see Figure 3). Figure 4 demonstrates that the emerging markets index has performed well this year, as global central bank policies have supported the demand for riskier investments, but African markets, excluding South Africa, have been largely bypassed by this trend. Within Africa, total dollar returns were highest for South Africa (14.48 percent) and lowest for Ghana and Nigeria (-13.72 percent and -34.36 percent, respectively), while Kenya and the West African Economic and Monetary Union’s exchange (BRVM) had marginal returns. The dramatic decline in Nigeria’s index can be accounted for in large part by the major depreciation of the naira against the dollar (as reflected in its local currency returns compared to the dollar returns); similarly, South Africa’s success can be attributed to the strengthening of the rand.
Related
- Africa in focus
China’s direct investment in Africa: Reality versus myth David Dollar, Heiwei Tang, and Wenjie Chen Thursday, September 3, 2015 - Africa in focus
Understanding the Economic Effects of the 2014 Ebola Outbreak in West Africa Amadou Sy and Amy Copley Wednesday, October 1, 2014 - Africa in ... The Africa Growth Initiative (AGI) Markets Monitor aims to provide up-to-date financial market and foreign exchange analysis for Africa watchers with a wide range of economic, business, and financial interests in the continent.https://www.brookings.edu/research/the-international-monetary-system-is-it-fit-for-purpose/The international monetary system: Is it fit for purpose?http://webfeeds.brookings.edu/~/207566894/0/brookingsrss/topics/emergingmarkets~The-international-monetary-system-Is-it-fit-for-purpose/
Wed, 05 Oct 2016 20:24:37 +0000https://www.brookings.edu/?post_type=research&p=335588

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1.1 What’s the issue?

The key question concerning the international monetary system is whether it can function in a manner that promotes global economic and financial stability rather than become a source of instability in itself or a channel through which such instability becomes more pervasive.

Recent controversies have revolved around the roles of central banks, which have become key players in domestic and international policy arenas. With rising financial market integration and falling barriers to capital flows, actions of central banks—especially those of large economies—have effects beyond their national borders. Logically, therefore, central banks should pay heed to the effects of their policies on other countries.

FDI and portfolio equity now dominate the external liabilities of emerging markets.

1.2 What’s the Debate?

Indeed, calls for global monetary coordination are on the rise in the aftermath of the recent financial crisis and are a source of increasingly heated debate. While central bank policy coordination is a laudable proposition, however, it risks deflecting attention from a set of deep underlying policy problems and could set up a proxy battle that proves counterproductive.

Emerging markets rightly worry that monetary policy actions of central banks in advanced economies heighten capital flow volatility. This essay suggests a framework for dealing with the challenges that such volatility poses for emerging markets, although the analysis has broader implications for domestic policy coordination as well as for the international system.

In reality, capital flows to emerging markets tend to be procyclical.

In principle, capital flows should change over an economic cycle. If an economy is effectively sharing risk with the rest of the world, it should receive larger capital inflows in times of poor performance. When the economy rebounds, it should receive smaller inflows. In reality, capital flows to emerging markets tend to be procyclical, exacerbating domestic business cycles, rather than countercyclical.

In an ideal, frictionless world, capital flows would function in three ways. First, they would be relatively stable and help convey indirect benefits such as transfers of technological expertise, expertise in corporate governance, and deepening of financial markets. Second, capital flows would be driven mainly by macroeconomic fundamentals, such as output growth, productivity, and interest rates. Third, they should cushion domestic business cycle conditions. As noted earlier, this implies net inflows should be countercyclical. Fourth, capital flows would be mediated in a well-regulated way, both in terms of domestic and international financial markets. And fifth, from the perspective of emerging markets, the advanced economies would have relatively well-functioning policies and economies.

Measured against this set of criteria, there has been some progress over the past decade and a half. Foreign direct investment and portfolio equity now dominate the external liabilities of emerging markets in place of foreign currency external debt. This shift has meant more stable capital flows that have the right risk-sharing characteristics. Foreign investors share in both the return and currency risk on such investments. Portfolio equity inflows can be volatile, but do not typically create vulnerability to the sort of painful crises that emerging markets suffered in the past when they were dependent on debt.

However, that’s where the progress largely ends. Capital flows to emerging markets are still largely procyclical, driven more by short-term shifts in market sentiment than long-term macroeconomic fundamentals. These economies’ foreign currency external debt has recently begun to rise again. Additionally, advanced economy policies have become a source of risk rather than stability in the world economy.

1.3 What to watch out for?

What are reasonable policy solutions to close the gaps? First, it is necessary to reflect on what the sources of failures are relative to the benchmark.

One can characterize three types of shortcomings: market failures, policy failures, and institutional failures. The distinction among these is not clear-cut, but the coarse typology still has its uses.

Market failures can occur, for instance, when herding behavior occurs due to information asymmetries or because of perverse incentives faced by investment managers to take on excessive risk. There has been some progress in dealing with these issues through financial market regulation, although the work is far from complete.

Related Books

Then there are policy failures. Undisciplined macroeconomic policies and inconsistent or ineffectual financial regulatory policies can heighten the risks associated with volatile capital flows. Measures that improve the benefit-cost tradeoff from capital flows include getting macroeconomic policies right and financial markets working better, both by encouraging financial market development and ensuring adequate regulatory capacity.

The third source of the discrepancy revolves around institutional failures, both domestic and international.

First, on the domestic front, the critical issue involves a mix of various policies. Most central bankers now face multiple, and indeed, expanding mandates. This constitutes a failure at the institutional level within countries. In advanced economies, in particular, governments continue to rely on the relatively easy crutch of monetary policies both to prevent financial meltdown and support growth. The balancing act faced by central bankers, difficult in the best of times, becomes even more so when other policies—fiscal and structural—are providing little support or even working at cross-purposes.

This is, in a sense, an institutional failure. It is not that monetary policy is getting it wrong, but that monetary policy is hemmed in by other policies. And this requires change at the institutional level, to get the mix of policies right.

It is not that monetary policy is getting it wrong, but that monetary policy is hemmed in by other policies.

The second aspect is the institutional framework at the international level. With increasing financial integration, policy measures by the advanced economies inevitably result in spillovers in emerging markets (and vice versa). There is at present no good governance mechanism to mediate the effects of such spillovers. Asking central banks to assume the additional mandate of considering the spillover effects of their policies seems logical, but would make an already delicate balancing act for these institutions even more complicated.

Ultimately there is little choice but to confront all of these inter-related failures, both in terms of thinking more formally about spillover effects and also about the governance structure of international institutions, whose legitimacy has to be rebuilt if they are to be effective at helping to solve collective action problems.

The lack of effective global governance has major implications for capital flows. Emerging markets feel the need to accumulate more reserves to secure a layer of protection from volatile capital flows. This is not a tenable situation, where the international institutional set-up leaves emerging markets with little recourse in terms of safety nets other than self-insurance through reserve accumulation.

Coordination of policies sounds good in theory but is complicated in practice. When national and international interests coincide, as happened in the midst of the financial crisis, coordination works well. Consider the 1985 Plaza Accord, when there was a happy coincidence of domestic and global interests. Even in cases where such accords succeeded in influencing currency values, they had little effect on the domestic policies of the concerned countries. Although most of the agreed-on policy commitments were in each nation’s own long-term interests, currency intervention proved easier than shifting domestic policies.

If central bankers wage proxy battles on behalf of their feckless political leaders, they risk damaging their hard-won credibility, independence, and effectiveness.

Rather than fulminating about other countries’ monetary policies and calling for coordination, national leaders ought to fix their own policies first. They should let their central banks get back to doing what they can do best, which is to deliver low inflation and financial stability. If central bankers wage proxy battles on behalf of their feckless political leaders, they risk damaging their hardwon credibility, independence, and effectiveness.

Before devising solutions, it is essential for policymakers to get a good grasp of the underlying mix between the three types of failures identified above. When the relevant failures are really domestic policy and institutional failures, they need to be confronted as such rather than as externally-induced problems. Ultimately, unless the mix of domestic policies and the structure of international governance are improved, both the domestic policy measures to deal with capital flow volatility as well as measures to improve the functioning of financial markets, while necessary, might end up being futile.

This essay draws on the author’s remarks at a BIS-Bank of Russia Conference held in Moscow in July 2013.

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https://www.brookings.edu/wp-content/uploads/2016/10/banner_chapter11.png?w=320** 1.1 What's the issue?
The key question concerning the international monetary system is whether it can function in a manner that promotes global economic and financial stability rather than become a source of instability in itself or a channel through which such instability becomes more pervasive.
Recent controversies have revolved around the roles of central banks, which have become key players in domestic and international policy arenas. With rising financial market integration and falling barriers to capital flows, actions of central banks—especially those of large economies—have effects beyond their national borders. Logically, therefore, central banks should pay heed to the effects of their policies on other countries.
FDI and portfolio equity now dominate the external liabilities of emerging markets.
1.2 What’s the Debate?
Indeed, calls for global monetary coordination are on the rise in the aftermath of the recent financial crisis and are a source of increasingly heated debate. While central bank policy coordination is a laudable proposition, however, it risks deflecting attention from a set of deep underlying policy problems and could set up a proxy battle that proves counterproductive.
Emerging markets rightly worry that monetary policy actions of central banks in advanced economies heighten capital flow volatility. This essay suggests a framework for dealing with the challenges that such volatility poses for emerging markets, although the analysis has broader implications for domestic policy coordination as well as for the international system.
In reality, capital flows to emerging markets tend to be procyclical.
In principle, capital flows should change over an economic cycle. If an economy is effectively sharing risk with the rest of the world, it should receive larger capital inflows in times of poor performance. When the economy rebounds, it should receive smaller inflows. In reality, capital flows to emerging markets tend to be procyclical, exacerbating domestic business cycles, rather than countercyclical.
In an ideal, frictionless world, capital flows would function in three ways. First, they would be relatively stable and help convey indirect benefits such as transfers of technological expertise, expertise in corporate governance, and deepening of financial markets. Second, capital flows would be driven mainly by macroeconomic fundamentals, such as output growth, productivity, and interest rates. Third, they should cushion domestic business cycle conditions. As noted earlier, this implies net inflows should be countercyclical. Fourth, capital flows would be mediated in a well-regulated way, both in terms of domestic and international financial markets. And fifth, from the perspective of emerging markets, the advanced economies would have relatively well-functioning policies and economies.
Measured against this set of criteria, there has been some progress over the past decade and a half. Foreign direct investment and portfolio equity now dominate the external liabilities of emerging markets in place of foreign currency external debt. This shift has meant more stable capital flows that have the right risk-sharing characteristics. Foreign investors share in both the return and currency risk on such investments. Portfolio equity inflows can be volatile, but do not typically create vulnerability to the sort of painful crises that emerging markets suffered in the past when they were dependent on debt.
However, that’s where the progress largely ends. Capital flows to emerging markets are still largely procyclical, driven more by short-term shifts in market sentiment than long-term macroeconomic fundamentals. These economies’ foreign currency external debt has recently begun to rise again. Additionally, advanced economy policies have become a source of risk rather than stability in the world economy.
1.3 What to watch out for?
What are ... ** 1.1 What's the issue?
The key question concerning the international monetary system is whether it can function in a manner that promotes global economic and financial stability rather than become a source of instability in itself or a channel ... https://www.brookings.edu/research/october-2016-update-to-tiger-tracking-indexes-for-the-global-economic-recovery/October 2016 Update to TIGER: Tracking Indexes for the Global Economic Recoveryhttp://webfeeds.brookings.edu/~/206094468/0/brookingsrss/topics/emergingmarkets~October-Update-to-TIGER-Tracking-Indexes-for-the-Global-Economic-Recovery/
Sun, 02 Oct 2016 15:01:37 +0000https://www.brookings.edu/?post_type=research&p=334729

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The world economy is sliding back into the low growth morass it has been stuck in for some time. A strong adverse feedback loop has set in with low growth, fragile business and consumer confidence, financial system stresses, trade tensions, and political instability feeding into and reinforcing each other.

The latest update of the Brookings-FT Tiger index presents a picture of general despondency in the global economy that more than offsets isolated signs of strength in some economic indicators in a few countries. Click a country name below the Overall Growth Index to view charts for the main TIGER indexes by country and charts for the indicators that make up the indexes, which are broken down by real activity, financial and confidence indicators.

Indices developed by Eswar Prasad and Karim Foda, The Brookings Institution, October 2016

As well as tracking country performance, the TIGER indexes also track the performance of key indicators across groups of advanced economies, emerging markets and a composite total. Click on the following links to view the updated charts for the following key indicators:

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The world economy is sliding back into the low growth morass it has been stuck in for some time. A strong adverse feedback loop has set in with low growth, fragile business and consumer confidence, financial system stresses, trade tensions, and political instability feeding into and reinforcing each other.
The latest update of the Brookings-FT Tiger index presents a picture of general despondency in the global economy that more than offsets isolated signs of strength in some economic indicators in a few countries. Click a country name below the Overall Growth Index to view charts for the main TIGER indexes by country and charts for the indicators that make up the indexes, which are broken down by real activity, financial and confidence indicators. Greece Ireland Netherlands Portugal South Korea
Country
Overall Growth Index
- Advanced Economy - Emerging Market Economy - Euro Periphery Economy - Euro Periphery / Advanced Economy
Learn more about the recovery in advanced and emerging markets (PDF)
Indices developed by Eswar Prasad and Karim Foda, The Brookings Institution, October 2016
As well as tracking country performance, the TIGER indexes also track the performance of key indicators across groups of advanced economies, emerging markets and a composite total. Click on the following links to view the updated charts for the following key indicators:
Real Activity Indicators
Financial Indicators
Confidence Indicators
For detailed information on the composition and construction of the indexes and a comprehensive description of the data and source information, please refer to the updated technical appendix.
Read the full analysis and commentary: Global Economy Remains Mired in Swamp of Low Growth »
The world economy is sliding back into the low growth morass it has been stuck in for some time. A strong adverse feedback loop has set in with low growth, fragile business and consumer confidence, financial system stresses, trade tensions, and ... https://www.brookings.edu/opinions/global-economy-remains-mired-in-swamp-of-low-growth/Global Economy Remains Mired in Swamp of Low Growthhttp://webfeeds.brookings.edu/~/206096236/0/brookingsrss/topics/emergingmarkets~Global-Economy-Remains-Mired-in-Swamp-of-Low-Growth/
Sun, 02 Oct 2016 14:46:05 +0000https://www.brookings.edu/?post_type=opinion&p=334734

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In true Sisyphean fashion, the world economy is faltering yet again, unable to gain much elevation and sliding back into the low growth morass it has been stuck in for some time. Major advanced and emerging market economies appear to be converging to a low growth environment characterized by weak investment, stagnant productivity, and tepid private sector confidence.

The Brookings-FT Tiger index presents a picture of general despondency in the global economy that more than offsets isolated signs of strength in some economic indicators in a few countries. A strong adverse feedback loop has set in with low growth, fragile business and consumer confidence, low interest rates, financial system stresses, trade tensions, and political instability feeding into and reinforcing each other.

In most countries, there seems little prospect of the forceful and concerted policy actions direly needed to break this loop. Instead, politicians in many countries continue to rely on external bogeymen as a cover for their own failures, feeding into protectionist and nationalistic sentiments, and thereby shooting themselves and their constituents in the foot.

The U.S. economy continues to send mixed signals. Growth in GDP and industrial production have weakened slightly during the course of the year.

The U.S. economy continues to send mixed signals. Growth in GDP and industrial production have weakened slightly during the course of the year. Investment and productivity growth are also stuck in the doldrums, but the labor market is humming along. Employment growth remains robust, labor force participation is recovering, and wage growth has picked up. The Federal Reserve appears to have boxed itself into raising rates in December if these patterns in labor market data persist. Fiscal and regulatory policies are likely to remain prisoners of political stalemates, adding to the uncertainty that has kept business and consumer confidence muted.

The euro area remains a simmering cauldron of trouble. Deflationary pressures have eased slightly and growth has picked up in some countries. But the low interest rate environment, changes in regulatory structures, and structural problems in the financial sector have laid bare the frailties of the European banking system, posing a serious threat to financial stability. Some countries in the region have been wracked by social and political instability, hampering business confidence and investment.

Economic activity and labor markets in Japan have strengthened modestly, but the Bank of Japan’s heroic and increasingly desperate measures to weaken the yen and counter deflation have not worked.

The U.K. economy appears to have survived the worst of the Brexit shock, with most financial market indicators recovering quickly from their post-referendum declines. Consumer and business confidence remain wobbly, however, and the true economic effects of the referendum outcome may be yet to transpire.

Growth in emerging markets has bottomed out, with even many vulnerable economies apparently putting the worst behind them.

The latest slew of economic data from China points to a stabilization of growth but also heightens concerns about the risks posed by an unabating investment binge. Robust retail sales are a welcome signal of firming domestic demand. The uptick in industrial production growth portends a broader base for GDP growth that is not overly dependent on the performance of the services sector. However, the continuing surges in bank loans and investment have intensified concerns about excess capacity in the economy and mounting bad loans in the banking system.

India remains a beacon of good growth. Recent positive signs, such as the implementation of a goods and services tax and the appointment of a well-respected central bank governor, have raised hopes that the Modi government is finally making a strong push on liberalization and reforms. The Indian economy’s relative resilience against external shocks reduces downside risks. But in the absence of banking, labor market, and other deep-rooted reforms, this resilience may not directly translate into sustained high growth.

In Brazil, the new government has stemmed the fall in consumer and business confidence, but it has its task cut out in coping with shrinking employment, retail sales, and industrial production.

Brazil and Russia remain in recession. In Brazil, the new government has stemmed the fall in consumer and business confidence, but it has its task cut out in coping with shrinking employment, retail sales, and industrial production. The severity of Russia’s recession has eased, with higher oil prices offering temporary relief.

The untrammeled creativity and boldness of central bankers remains the governing theme of global macroeconomic policymaking. The slaying of many sacred cows of the theory and practice of conventional central banking has boosted financial markets. But this has given most advanced economy central banks little traction in achieving their core mandates related to inflation targets or the objective of supporting growth.

The policy vacuum outside central banks has dented confidence, depressed domestic demand, hurt world trade, and remains a drag on global economic activity. Fixing this imbalance calls for strong political resolve and forceful policy actions, both of which remain in short supply.

Eswar Prasad is a professor in the Dyson School at Cornell University, senior fellow at the Brookings Institution, and author of “Gaining Currency: The Rise of the Renminbi.” Karim Foda is a senior research associate at Brookings.

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In true Sisyphean fashion, the world economy is faltering yet again, unable to gain much elevation and sliding back into the low growth morass it has been stuck in for some time. Major advanced and emerging market economies appear to be converging to a low growth environment characterized by weak investment, stagnant productivity, and tepid private sector confidence.
The Brookings-FT Tiger index presents a picture of general despondency in the global economy that more than offsets isolated signs of strength in some economic indicators in a few countries. A strong adverse feedback loop has set in with low growth, fragile business and consumer confidence, low interest rates, financial system stresses, trade tensions, and political instability feeding into and reinforcing each other.
In most countries, there seems little prospect of the forceful and concerted policy actions direly needed to break this loop. Instead, politicians in many countries continue to rely on external bogeymen as a cover for their own failures, feeding into protectionist and nationalistic sentiments, and thereby shooting themselves and their constituents in the foot.
The U.S. economy continues to send mixed signals. Growth in GDP and industrial production have weakened slightly during the course of the year.
The U.S. economy continues to send mixed signals. Growth in GDP and industrial production have weakened slightly during the course of the year. Investment and productivity growth are also stuck in the doldrums, but the labor market is humming along. Employment growth remains robust, labor force participation is recovering, and wage growth has picked up. The Federal Reserve appears to have boxed itself into raising rates in December if these patterns in labor market data persist. Fiscal and regulatory policies are likely to remain prisoners of political stalemates, adding to the uncertainty that has kept business and consumer confidence muted.
The euro area remains a simmering cauldron of trouble. Deflationary pressures have eased slightly and growth has picked up in some countries. But the low interest rate environment, changes in regulatory structures, and structural problems in the financial sector have laid bare the frailties of the European banking system, posing a serious threat to financial stability. Some countries in the region have been wracked by social and political instability, hampering business confidence and investment.
Economic activity and labor markets in Japan have strengthened modestly, but the Bank of Japan’s heroic and increasingly desperate measures to weaken the yen and counter deflation have not worked.
The U.K. economy appears to have survived the worst of the Brexit shock, with most financial market indicators recovering quickly from their post-referendum declines. Consumer and business confidence remain wobbly, however, and the true economic effects of the referendum outcome may be yet to transpire.
Growth in emerging markets has bottomed out, with even many vulnerable economies apparently putting the worst behind them.
The latest slew of economic data from China points to a stabilization of growth but also heightens concerns about the risks posed by an unabating investment binge. Robust retail sales are a welcome signal of firming domestic demand. The uptick in industrial production growth portends a broader base for GDP growth that is not overly dependent on the performance of the services sector. However, the continuing surges in bank loans and investment have intensified concerns about excess capacity in the economy and mounting bad loans in the banking system.
India remains a beacon of good growth. Recent positive signs, such as the implementation of a goods and services tax and the appointment of a well-respected central bank governor, have raised hopes that the Modi government is finally making a strong push on liberalization and reforms. The Indian economy’s relative ... In true Sisyphean fashion, the world economy is faltering yet again, unable to gain much elevation and sliding back into the low growth morass it has been stuck in for some time. Major advanced and emerging market economies appear to be converging ... https://www.brookings.edu/blog/order-from-chaos/2016/08/01/the-2016-rio-olympics-will-brazils-emergence-get-a-second-wind/The 2016 Rio Olympics: Will Brazil’s emergence get a second wind?http://webfeeds.brookings.edu/~/181021668/0/brookingsrss/topics/emergingmarkets~The-Rio-Olympics-Will-Brazil%e2%80%99s-emergence-get-a-second-wind/
Mon, 01 Aug 2016 15:00:57 +0000https://www.brookings.edu/?p=181383

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In these days when Brazil’s politics are in turmoil and its economy is in the doldrums, it is all too easy for Brazilians to dismiss their country’s decision to host the Summer 2016 Olympics as part and parcel of the same package of bad policy decisions that landed them in their present predicament. The steady drumbeat of negative coverage about Rio’s unpreparedness to host has made more than one international observer wonder if the International Olympic Committee made the right choice.

Nevertheless, it is important to recall what hosting the Olympics signified for Brazil at the time that Rio de Janeiro submitted its bid in 2007. For the administration of then-President Luiz Inácio Lula da Silva, hosting the 2016 Summer Olympics (and the 2014 World Cup) was a marker of Brazil’s success as an emerging power. A decade-long commodity boom powered above-average economic growth, allowed Brazil to accumulate unprecedented foreign currency reserves, substantially expanded the size of the middle class, and dramatically reduced poverty. As the eighth largest economy in the world in 2008, Brazilians had reason to want to showcase their country’s success to the world.

But hosting the Olympics represented more than merely a desire to highlight Brazil’s (then) success at home. As we show in our new book “Aspirational Power,” it was also part of a longrunning Brazilian goal for their country to join the ranks of major powers. And during the past decade, Brazil thought it had finally arrived. Under the Lula administration, Brazil’s diplomatic presence expanded across Africa and the Caribbean and Brazilian diplomats took the helm of the World Trade Organization and Food and Agriculture Organization of the United Nations. Brazil worked to transform the BRICS (Brazil, Russia, India, China, South Africa) into more than a marketing label awarded by an investment bank, but rather into a club of emerging powers that worked together to reform the international order. And Brazil sought a permanent seat on the United Nations Security Council, a privilege currently held by only five countries (China, France, Russia, United Kingdom, and United States).

The Olympics were a particularly appropriate venue for Brazilian leaders to showcase what in 2007 looked like a remarkably successful story of emergence. Brazil is fortunate to live in (and have shaped) a peaceful neighborhood in which modest amounts of hard power are sufficient to secure national sovereignty. It has instead come to emphasize soft power as the foundation of its international influence. Soft power is the ability to attract support: Other governments and peoples come to support your country’s international policies because they admire you and want to emulate you. Successfully hosting the world’s largest celebration of peaceful athletic competition was a perfect fit with how Brazil would like to be perceived by the world and with how Brazil would prefer the international order to function.

Rio de Janeiro’s Mayor Eduardo Paes (C) and Rio de Janeiro’s Governor Luiz Fernando Pezao (2nd L) leave one of the two tunnels on the Transolimpica freeway route, which will connect the Rio 2016 Olympic Park and the Deodoro Sports Complex, in Rio de Janeiro, Brazil August 4, 2015. The transportation project is being carried out for the city’s redevelopment ahead of the 2016 Olympic Games. REUTERS/Ricardo Moraes

Relaunching Brazil’s aspirations on the global stage

As the 2016 Rio Olympics begin, it is true that the factors that powered Brazil’s emergence a decade ago have faded. The end of the commodity boom has not only undermined Brazil’s emergence, but also has undercut the rise of other members of the BRICS whose cooperation Brazil had counted on. Brazil’s domestic crisis has undermined its soft power internationally by eroding the attraction of Brazil’s model. And the vast corruption scandal associated with Petrobras tarnished its political and economic elites and institutions.

Nevertheless, Brazil’s interest in a favorable and stable international order endures. And Brazil’s aspirations for an influential global role go hand in hand with restoring prosperity and strengthening institutions at home. In the very short run, the presidential impeachment process, deep recession, and ongoing corruption investigations hurt Brazil’s soft power. But properly handled, the resolution of this crisis can contribute to restoring the luster of Brazil’s domestic model, showcasing the strength of its democratic institutions, preserving (as much as possible) the social and economic gains of recent times, and adding a successful model for fighting corruption. And despite the negative international coverage preceding them, the 2016 Olympics are likely to turn out better than expected: International attention will soon turn to the prowess of the athletes and the beauty of the Games’ setting in Rio.

Even in this difficult time, Brazil needs to engage with, rather than retreat from, the world in order to succeed.

Even in this difficult time, Brazil needs to engage with, rather than retreat from, the world in order to succeed. This means integrating into global value chains rather than remaining the most closed of the large economies. This means focusing on both trade facilitation and on freer trade with the other major world economies. It means putting Brazil’s domestic values—democracy, humanism, the peaceful resolution of conflicts—at the center of its international diplomacy, partnering with emerging democracies such as India and South Africa rather than the world’s autocracies. This does not mean turning its back on the important relationship it has with China, but there is also no reason to preferentially align with such a country on a wide array of global issues simply because both countries are major trading partners.

As Brazil recovers, it should think creatively of how to once again expand the use of its successful development assistance model abroad, as it has already done in Africa. And it would benefit from using its hard power, its military forces, to generate additional soft power by expanding its role in leading key international peacekeeping operations around the world, as it has in Haiti.

This is an ambitious international agenda for Brazil, in line with the aspirations that shaped its original bid to host the Olympics in 2007. This is an agenda that the world’s great democracies, such as the United States, should welcome. But it will also benefit Brazilians. If their country accomplishes all this, it will be much more deeply embedded in the global rule making process that shapes the functioning of the international order, and it will be much harder for the major powers to ignore Brazil’s interests as they collectively bargain over the future. This will in turn help Brazil contribute to a positive global order that supports prosperity and democratic stability at home.

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https://www.brookings.edu/wp-content/uploads/2016/07/rio_2016_001-e1469829996187.jpg?w=320In these days when Brazil’s politics are in turmoil and its economy is in the doldrums, it is all too easy for Brazilians to dismiss their country’s decision to host the Summer 2016 Olympics as part and parcel of the same package of bad policy decisions that landed them in their present predicament. The steady drumbeat of negative coverage about Rio’s unpreparedness to host has made more than one international observer wonder if the International Olympic Committee made the right choice.
Nevertheless, it is important to recall what hosting the Olympics signified for Brazil at the time that Rio de Janeiro submitted its bid in 2007. For the administration of then-President Luiz Inácio Lula da Silva, hosting the 2016 Summer Olympics (and the 2014 World Cup) was a marker of Brazil’s success as an emerging power. A decade-long commodity boom powered above-average economic growth, allowed Brazil to accumulate unprecedented foreign currency reserves, substantially expanded the size of the middle class, and dramatically reduced poverty. As the eighth largest economy in the world in 2008, Brazilians had reason to want to showcase their country’s success to the world.
But hosting the Olympics represented more than merely a desire to highlight Brazil’s (then) success at home. As we show in our new book “Aspirational Power,” it was also part of a longrunning Brazilian goal for their country to join the ranks of major powers. And during the past decade, Brazil thought it had finally arrived. Under the Lula administration, Brazil’s diplomatic presence expanded across Africa and the Caribbean and Brazilian diplomats took the helm of the World Trade Organization and Food and Agriculture Organization of the United Nations. Brazil worked to transform the BRICS (Brazil, Russia, India, China, South Africa) into more than a marketing label awarded by an investment bank, but rather into a club of emerging powers that worked together to reform the international order. And Brazil sought a permanent seat on the United Nations Security Council, a privilege currently held by only five countries (China, France, Russia, United Kingdom, and United States).
The Olympics were a particularly appropriate venue for Brazilian leaders to showcase what in 2007 looked like a remarkably successful story of emergence. Brazil is fortunate to live in (and have shaped) a peaceful neighborhood in which modest amounts of hard power are sufficient to secure national sovereignty. It has instead come to emphasize soft power as the foundation of its international influence. Soft power is the ability to attract support: Other governments and peoples come to support your country’s international policies because they admire you and want to emulate you. Successfully hosting the world’s largest celebration of peaceful athletic competition was a perfect fit with how Brazil would like to be perceived by the world and with how Brazil would prefer the international order to function. Rio de Janeiro's Mayor Eduardo Paes (C) and Rio de Janeiro's Governor Luiz Fernando Pezao (2nd L) leave one of the two tunnels on the Transolimpica freeway route, which will connect the Rio 2016 Olympic Park and the Deodoro Sports Complex, in Rio de Janeiro, Brazil August 4, 2015. The transportation project is being carried out for the city's redevelopment ahead of the 2016 Olympic Games. REUTERS/Ricardo Moraes
Relaunching Brazil’s aspirations on the global stage
As the 2016 Rio Olympics begin, it is true that the factors that powered Brazil’s emergence a decade ago have faded. The end of the commodity boom has not only undermined Brazil’s emergence, but also has undercut the rise of other members of the BRICS whose cooperation Brazil had counted on. Brazil’s domestic crisis has undermined its soft power internationally by eroding the attraction of Brazil’s model. And the ... In these days when Brazil’s politics are in turmoil and its economy is in the doldrums, it is all too easy for Brazilians to dismiss their country’s decision to host the Summer 2016 Olympics as part and parcel of the same package of ... https://www.brookings.edu/blog/order-from-chaos/2016/06/29/brazil-and-the-international-order-getting-back-on-track/Brazil and the international order: Getting back on trackhttp://webfeeds.brookings.edu/~/181027562/0/brookingsrss/topics/emergingmarkets~Brazil-and-the-international-order-Getting-back-on-track/
Wed, 29 Jun 2016 18:00:00 +0000http://www.brookings.edu?p=109719&preview_id=109719Crisis seems to be the byword for Brazil today: political crisis, economic crisis, corruption crisis. Yet despite the steady drum beat of grim news, Brazil is more than likely to resume its upward trajectory within a few years.

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Crisis seems to be the byword for Brazil today: political crisis, economic crisis, corruption crisis. Even the 2016 Rio Olympics seem to teeter on the edge of failure, according to the governor of the state of Rio de Janeiro. Yet despite the steady drum beat of grim news, Brazil is more than likely to resume its upward trajectory within a few years. Its present economic and political troubles mask a number of positives: the strength of its democracy and a new found willingness to fight corruption at all costs. With the correct policies in place, its economy will recover in due course. The impeachment process against Dilma Rousseff will soon be over, one way or the other. The present troubles are merely a temporary detour on Brazil’s long quest to achieve major power status and a consequential role in the international system. In a world in turmoil, where geopolitical tensions are on the rise and the fabric of international politics is stressed by events such as Brexit, we should not lose sight of Brazil’s history of and potential for contributing to sustaining the liberal international order.

Brazil’s aspirations for greatness

Brazil has long aspired to grandeza (greatness) both at home and abroad. As its first ambassador to Washington, Joaquim Nabuco (1905-1910) once said, “Brazil has always been conscious of its size, and it has been governed by a prophetic sense with regard to its future.” As we document in our new book, Brazil has reached for major power status at least four times in the past 100 years: participating as a co-belligerent with the Allies in World War One and seeking a permanent seat on the Council of the League of Nations thereafter; joining the Allies in World War II and aspiring to a permanent seat on the United Nations Security Council (UNSC) in 1945; mastering nuclear technology beginning in the 1970s, including launching a covert military program (now terminated) to build a nuclear explosive device; and most recently, beginning with the presidency of Luiz Inácio Lula da Silva (2003-2011), seeking to become a leader in multilateral institutions, including actively campaigning for a permanent seat on the UNSC.

A decade ago, many Brazilians believed that this time their country was poised to secure its position as a major power. As the seventh largest economy in the world with the 10th largest defense budget and significant soft power, Brazilian leaders such as Lula saw their country as being “in the mix” of major powers who, while not able to make the international order alone, could very well shape its evolution through uncertain times together with other major powers. Certainly, they no longer saw Brazil as one of the middle or small powers, the “order takers” in the international system.

Brazil saw a new opportunity to emerge as a major power in the advent of a relatively stable and peaceful post-Cold War geopolitical order, the decade-long commodity boom that supercharged its economy after 2002, and the rise of the BRICS (Brazil, Russia, India, China, and South Africa). Between 2002 and 2013, Brazil’s virtuous trifecta—democratic consolidation, rapid economic growth, and reduced inequality—was a boon to its soft power. This combination was highly attractive to many in the developing world, contributing to Brazil’s claim to leadership on the international stage as a bridge between the global South and the great powers. International peace and stability particularly favored Brazil’s predilection for deploying soft power rather than hard power. And in the BRICS, Brazil saw an opportunity to work together with other emerging powers critical of the present international order to advance its agenda for reformed global institutions.

Rethinking Brazil’s approach to global influence

Brazil’s bridge-building strategy was effective in advancing its national interests in multilateral forums, most recently on global internet governance and global climate change. But the BRICS dimension of Brazil’s strategy detracted from its ability to influence the world’s great democracies. The BRICS identity associated Brazil with authoritarian powers—China and Russia—that were viewed by the United States and its allies, at best, as unhelpful critics and, at worst, as deliberate saboteurs of the present order. This undermined Brazil’s credibility with Washington and other leading democracies, and hindered its ability to advance its preferred policies on everything from nonproliferation to the reform of global economic institutions to the debate on humanitarian intervention. In retrospect, working more closely with other emerging democracies that seek reform of the international order, such as through the India-Brazil-South Africa association known as IBSA, would have more clearly signaled Brazil’s constructive intentions while still preserving its critical posture.

Today, the opportunities that powered Brazil’s most recent rise—post-Cold War geopolitical stability and a massive commodity boom—are receding, replaced by a more fractious and dangerous international system. Despite troubles at home, it is not too early for Brazil’s leaders to think anew about how to strengthen national capabilities and deploy them strategically to address this new environment. This includes fortifying domestic institutions, both to address the present crisis but also to restore the luster of Brazil’s soft power. It means bolstering Brazil’s hard power capabilities once the economy improves and deploying them in ways that contribute to its soft power, for example by taking on additional responsibility for leading critical international peacekeeping operations as it has in Haiti. It means thinking carefully about how to signal to the democratic great powers Brazil’s commitment to a strengthened liberal international order, even as it holds onto its own principles and works towards reform of multilateral institutions. And eventually, as Brazil completes its recovery, it means contributing more substantially to the costs of maintaining its preferred global order. A Brazil that achieves all this will be well positioned to have a positive global impact, continuing to be a strong (if sometimes critical) partner for the United States in shaping the international order.

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UncategorizedCrisis seems to be the byword for Brazil today: political crisis, economic crisis, corruption crisis. Even the 2016 Rio Olympics seem to teeter on the edge of failure, according to the governor of the state of Rio de Janeiro. Yet despite the steady drum beat of grim news, Brazil is more than likely to resume its upward trajectory within a few years. Its present economic and political troubles mask a number of positives: the strength of its democracy and a new found willingness to fight corruption at all costs. With the correct policies in place, its economy will recover in due course. The impeachment process against Dilma Rousseff will soon be over, one way or the other. The present troubles are merely a temporary detour on Brazil’s long quest to achieve major power status and a consequential role in the international system. In a world in turmoil, where geopolitical tensions are on the rise and the fabric of international politics is stressed by events such as Brexit, we should not lose sight of Brazil’s history of and potential for contributing to sustaining the liberal international order.
Brazil’s aspirations for greatness
Brazil has long aspired to grandeza (greatness) both at home and abroad. As its first ambassador to Washington, Joaquim Nabuco (1905-1910) once said, “Brazil has always been conscious of its size, and it has been governed by a prophetic sense with regard to its future.” As we document in our new book, Brazil has reached for major power status at least four times in the past 100 years: participating as a co-belligerent with the Allies in World War One and seeking a permanent seat on the Council of the League of Nations thereafter; joining the Allies in World War II and aspiring to a permanent seat on the United Nations Security Council (UNSC) in 1945; mastering nuclear technology beginning in the 1970s, including launching a covert military program (now terminated) to build a nuclear explosive device; and most recently, beginning with the presidency of Luiz Inácio Lula da Silva (2003-2011), seeking to become a leader in multilateral institutions, including actively campaigning for a permanent seat on the UNSC.
A decade ago, many Brazilians believed that this time their country was poised to secure its position as a major power. As the seventh largest economy in the world with the 10th largest defense budget and significant soft power, Brazilian leaders such as Lula saw their country as being “in the mix” of major powers who, while not able to make the international order alone, could very well shape its evolution through uncertain times together with other major powers. Certainly, they no longer saw Brazil as one of the middle or small powers, the “order takers” in the international system.
Brazil saw a new opportunity to emerge as a major power in the advent of a relatively stable and peaceful post-Cold War geopolitical order, the decade-long commodity boom that supercharged its economy after 2002, and the rise of the BRICS (Brazil, Russia, India, China, and South Africa). Between 2002 and 2013, Brazil’s virtuous trifecta—democratic consolidation, rapid economic growth, and reduced inequality—was a boon to its soft power. This combination was highly attractive to many in the developing world, contributing to Brazil’s claim to leadership on the international stage as a bridge between the global South and the great powers. International peace and stability particularly favored Brazil’s predilection for deploying soft power rather than hard power. And in the BRICS, Brazil saw an opportunity to work together with other emerging powers critical of the present international order to advance its agenda for reformed global institutions.
Rethinking Brazil’s approach to global influence
Brazil’s bridge-building strategy was effective in advancing its national interests in multilateral ... Crisis seems to be the byword for Brazil today: political crisis, economic crisis, corruption crisis. Even the 2016 Rio Olympics seem to teeter on the edge of failure, according to the governor of the state of Rio de Janeiro.https://www.brookings.edu/blog/brookings-now/2016/05/13/watch-whats-next-for-brazil-after-the-impeachment-of-president-dilma-rousseff/WATCH: What’s next for Brazil after the impeachment of President Dilma Rousseff?http://webfeeds.brookings.edu/~/181027574/0/brookingsrss/topics/emergingmarkets~WATCH-What%e2%80%99s-next-for-Brazil-after-the-impeachment-of-President-Dilma-Rousseff/
Mon, 30 Nov -0001 00:00:00 +0000http://www.brookings.edu?p=111342&preview_id=111342

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This week, the Federal Senate voted to put Brazilian President Dilma Rousseff on trial as part of an impeachment process against her. Harold Trinkunas, senior fellow and director of the Latin America Initiative at Brookings, participated in a Facebook Live event to discuss the impeachment process, the causes for it, and what happens next.

Trinkunas, who is co-author of the forthcoming book, “Aspirational Power: Brazil on the long road to global influence” (Brookings Institution Press, 2016), also addressed how the unfolding political drama affects Brazil’s trajectory as a rising regional and global power; how it reflects larger social and political divisions in Brazil; and what impact, if any, it will have on Rio de Janeiro’s Summer Olympic Games in August.

See also a recent blog post by Trinkunas, “Can Brazil right itself?,” written following the impeachment vote by Brazil’s lower chamber of Congress in April.

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UncategorizedThis week, the Federal Senate voted to put Brazilian President Dilma Rousseff on trial as part of an impeachment process against her. Harold Trinkunas, senior fellow and director of the Latin America Initiative at Brookings, participated in a Facebook Live event to discuss the impeachment process, the causes for it, and what happens next.
Trinkunas, who is co-author of the forthcoming book, “Aspirational Power: Brazil on the long road to global influence” (Brookings Institution Press, 2016), also addressed how the unfolding political drama affects Brazil’s trajectory as a rising regional and global power; how it reflects larger social and political divisions in Brazil; and what impact, if any, it will have on Rio de Janeiro’s Summer Olympic Games in August.
See also a recent blog post by Trinkunas, “Can Brazil right itself?,” written following the impeachment vote by Brazil’s lower chamber of Congress in April. This week, the Federal Senate voted to put Brazilian President Dilma Rousseff on trial as part of an impeachment process against her. Harold Trinkunas, senior fellow and director of the Latin America Initiative at Brookings, participated in a ... https://www.brookings.edu/on-the-record/five-rising-democracies/Five rising democracieshttp://webfeeds.brookings.edu/~/171797286/0/brookingsrss/topics/emergingmarkets~Five-rising-democracies/
Thu, 12 May 2016 19:42:00 +0000http://www.brookings.edu?p=94912&post_type=on-the-record&preview_id=94912Brookings Senior Fellow Ted Piccone speaks at a forum hosted by the Roosevelt House Public Policy Institute at Hunter College. He and Ambassadors Hardeep Singh Puri and Antonio de Aguiar discuss Ted's new book, Five Rising Democracies and the Fate of the International Liberal Order.

While the spread of democracy over the last three decades has inspired hope for an international liberal order, recent shifting power balances and democratic backsliding are shaking this foundation. In his new book, Brookings Institution Senior Fellow Ted Piccone discusses how five pivotal countries—India, Brazil, South Africa, Turkey, and Indonesia—could play a critical role as examples and supporters of liberal ideas and practices.

Mr. Piccone, Hardeep Singh Puri, former Ambassador of India to the U.N. and Secretary General of the Independent Commission on Multilateralism, and Antonio de Aguiar Patriota, Ambassador of Brazil to the U.N. and former Minister of External Relations, discuss the ways in which these countries stand out for their embrace of globalization and liberal norms on their own terms—and how, in a multipolar world, they may impact our shared future.

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The Roosevelt House Public Policy Institute hosted a forum with Ted Piccone and Ambassadors Hardeep Singh Puri and Antonio de Aguiar Patriota as they discussed his new book, Five Rising Democracies and the Fate of the International Liberal Order.
While the spread of democracy over the last three decades has inspired hope for an international liberal order, recent shifting power balances and democratic backsliding are shaking this foundation. In his new book, Brookings Institution Senior Fellow Ted Piccone discusses how five pivotal countries—India, Brazil, South Africa, Turkey, and Indonesia—could play a critical role as examples and supporters of liberal ideas and practices.
Mr. Piccone, Hardeep Singh Puri, former Ambassador of India to the U.N. and Secretary General of the Independent Commission on Multilateralism, and Antonio de Aguiar Patriota, Ambassador of Brazil to the U.N. and former Minister of External Relations, discuss the ways in which these countries stand out for their embrace of globalization and liberal norms on their own terms—and how, in a multipolar world, they may impact our shared future.
The Roosevelt House Public Policy Institute hosted a forum with Ted Piccone and Ambassadors Hardeep Singh Puri and Antonio de Aguiar Patriota as they discussed his new book, Five Rising Democracies and the Fate of the International Liberal Order.https://www.brookings.edu/blog/order-from-chaos/2016/04/21/can-brazil-right-itself/Can Brazil right itself?http://webfeeds.brookings.edu/~/181027580/0/brookingsrss/topics/emergingmarkets~Can-Brazil-right-itself/
Mon, 30 Nov -0001 00:00:00 +0000http://www.brookings.edu?p=109423&preview_id=109423The current turmoil in Brazil isn't just roiling it domestically—it undoubtedly undermines the attractiveness of its model abroad.

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On Sunday, April 17, over two-thirds of the representatives in the lower chamber of Brazil’s Congress voted in favor of impeaching President Dilma Rousseff. The president is accused of poor administration and manipulating government accounts to make the economy look healthier than it actually was in advance of the 2014 presidential election.

The deepening sense of economic crisis and political deadlock in Brazil, topped off by a steady drumbeat of revelations coming out of the Lava Jato (“Operation Car Wash”) corruption investigation, led the centrist Brazilian Democratic Movement Party (PMDB) to abandon its support for the government and join the opposition in calling for President Rousseff to go. The 2014 elections brought more conservative representatives—particularly from evangelical or pro-military constituencies—into Congress, making it even more difficult for President Rousseff and her allies to find support to block impeachment.

The decision on impeachment now passes to the Brazilian Senate, which if it decides to put President Rousseff on trial, initiates a six month process during which Vice President Michel Temer takes over temporarily. But more fundamentally, impeachment is driven by the sense among Brazil’s elite and many in its middle class that President Rousseff and her government are no longer capable of managing Brazil’s crisis. And in fact, the Rousseff administration has been unable to deal with the deepest recession in 80 years and rising inflation—nor has it been able to rein in a growing government deficit, let alone implement badly needed long-term reforms to government spending.

Politics is local, consequences are global

The debates and speeches made in the marathon legislative sessions leading up to the Sunday vote made it clear that impeachment is an eminently political process in Brazil, much as it is in the United States. This politicization has contributed to a considerable backlash from the left, in Brazil and in Latin America more broadly, rejecting the legitimacy of the process. Rousseff’s supporters have also challenged the legitimacy of the process because a very substantial number of the legislators sitting in judgement of President Rousseff face criminal and civil charges themselves, mostly on corruption. However, some on the left have gone as far as calling the impeachment process in Brazil a coup d’etat, part of a vast right-wing conspiracy across the continent to roll back the political achievements of the new Latin American left.

[I]mpeachment is an eminently political process in Brazil.

A more nuanced assessment of the present situation should lead us to three conclusions:

This is not a coup d’etat: A coup takes place when a legitimately elected head of government is illegally and unconstitutionally removed through the use or threat of use of force. In the Latin American context, this particularly implies a role by the military in displacing civilian leaders from power. The impeachment process in Brazil, even if politically motivated, is taking place within the guidelines set out by the Brazilian constitution. There are checks and balances that have worked throughout the process, enabling the president and her opponents to file motions and appeals, up to and including the Federal Supreme Court. By definition, a process that operates within the bounds of Brazil’s constitution and its institutions is not a coup d’etat. President Rousseff and her allies may be unhappy with the outcome of the impeachment process, but they are unwise to frame a constitutionally permitted process as a coup. Nor will such a frame gain them much sympathy beyond their usual supporters abroad or at home.

This is not the end, this is only the beginning: This is a key point President Rousseff made in a speech reacting to the results of the April 17 impeachment vote. And she is absolutely correct, both from a constitutional and a political perspective. The process could move quite quickly once the Brazilian Senate votes to begin the trial, but the process could take until early next year (2017). While Brazil’s elites would undoubtedly wish that President Rousseff follow the example of former Brazilian President Collor de Mello in 1992 and resign immediately, this seems unlikely given her reaction to the impeachment vote. So what is likely to follow is a long and complex political process. If Vice President Temer takes office temporarily while the trial in the Senate in underway, his tenure is at risk because the Federal Supreme Court has ordered that he should also face impeachment on the same charges as President Rousseff. Those immediately in the presidential line of succession after the vice president, such as Speaker of the House Eduardo Cunha, are under judicial investigation on corruption charges. This means that any likely successor to President Rousseff will lack the political capital to implement short-term measures to control inflation and bring down government deficits, not to mention long-term projects to improve infrastructure, education, innovation, and trade policies. All the while facing constant sniping from Rousseff’s embittered political party (the PT) and its allies.

While crisis persists, Brazil’s global and regional influence suffers: As I discuss in my forthcoming book, “Aspirational Power: Brazil’s Long Road to Global Influence,” for historical reasons Brazil’s capabilities to influence global order is heavily skewed towards soft power. Soft power is based not only on skilled diplomacy but on the attractiveness of a country’s domestic political, economic, social, and cultural model. The current turmoil in Brazil undoubtedly undermines the attractiveness of its model abroad. But even closer to home, political distraction and economic recession in Brazil has knock-on effects for its trade partners in Mercosur. And political uncertainty about who will be the next president of Brazil (and for how long) makes it difficult for Brazilian diplomacy to play its traditional role as the primus inter pares in South America.

The current turmoil in Brazil undoubtedly undermines the attractiveness of its model abroad.

Righting the ship but creating regional waves

The political crisis in Brazil is unlikely to be fully resolved before the 2018 presidential election, even though there have been some calls for early elections. Even if Rousseff manages to beat back efforts to try her in the Senate, she will be quite weakened and lack the political capital to implement essential reforms. On the other hand, any successor to Rousseff will face questions from the left as to the legitimacy of his or her rule and a highly polarized legislature—that person will find it difficult to build coalitions to pass and implement economic reforms.

In the long term, Brazil will undoubtedly right the ship of state and resume its path towards economic development and global influence. But for the rest of the hemisphere, the current crisis has important implications, particularly if Brazil follows the pattern of recent political changes in the region that have tended to turn incumbents out of power. The result will be a greater diversity in the foreign policy of South American states, further breaking down the regional consensus that Brazil had encouraged within the Union of South American Nations.

The United States, following the normalization of relations with Cuba and a successful 2015 Summit of the Americas, would benefit from greater diversity through improved opportunities to build partnerships with new political leaders in the region. But it is more important for the United States to avoid being sucked into the domestic political polarization underway in Brazil. The United States will have to thread the needle carefully to support democracy in Brazil, avoid taking sides in domestic politics, maintain a positive relationship with this key country, and build on recent foreign policy successes in the hemisphere.

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UncategorizedOn Sunday, April 17, over two-thirds of the representatives in the lower chamber of Brazil’s Congress voted in favor of impeaching President Dilma Rousseff. The president is accused of poor administration and manipulating government accounts to make the economy look healthier than it actually was in advance of the 2014 presidential election.
The deepening sense of economic crisis and political deadlock in Brazil, topped off by a steady drumbeat of revelations coming out of the Lava Jato (“Operation Car Wash”) corruption investigation, led the centrist Brazilian Democratic Movement Party (PMDB) to abandon its support for the government and join the opposition in calling for President Rousseff to go. The 2014 elections brought more conservative representatives—particularly from evangelical or pro-military constituencies—into Congress, making it even more difficult for President Rousseff and her allies to find support to block impeachment.
The decision on impeachment now passes to the Brazilian Senate, which if it decides to put President Rousseff on trial, initiates a six month process during which Vice President Michel Temer takes over temporarily. But more fundamentally, impeachment is driven by the sense among Brazil’s elite and many in its middle class that President Rousseff and her government are no longer capable of managing Brazil’s crisis. And in fact, the Rousseff administration has been unable to deal with the deepest recession in 80 years and rising inflation—nor has it been able to rein in a growing government deficit, let alone implement badly needed long-term reforms to government spending.
Politics is local, consequences are global
The debates and speeches made in the marathon legislative sessions leading up to the Sunday vote made it clear that impeachment is an eminently political process in Brazil, much as it is in the United States. This politicization has contributed to a considerable backlash from the left, in Brazil and in Latin America more broadly, rejecting the legitimacy of the process. Rousseff’s supporters have also challenged the legitimacy of the process because a very substantial number of the legislators sitting in judgement of President Rousseff face criminal and civil charges themselves, mostly on corruption. However, some on the left have gone as far as calling the impeachment process in Brazil a coup d’etat, part of a vast right-wing conspiracy across the continent to roll back the political achievements of the new Latin American left.
[I]mpeachment is an eminently political process in Brazil.
A more nuanced assessment of the present situation should lead us to three conclusions:
- This is not a coup d’etat: A coup takes place when a legitimately elected head of government is illegally and unconstitutionally removed through the use or threat of use of force. In the Latin American context, this particularly implies a role by the military in displacing civilian leaders from power. The impeachment process in Brazil, even if politically motivated, is taking place within the guidelines set out by the Brazilian constitution. There are checks and balances that have worked throughout the process, enabling the president and her opponents to file motions and appeals, up to and including the Federal Supreme Court. By definition, a process that operates within the bounds of Brazil’s constitution and its institutions is not a coup d’etat. President Rousseff and her allies may be unhappy with the outcome of the impeachment process, but they are unwise to frame a constitutionally permitted process as a coup. Nor will such a frame gain them much sympathy beyond their usual supporters abroad or at home. - This is not the end, this is only the beginning: This is a key point President Rousseff made in a speech reacting to the results of the April 17 impeachment vote. And she is absolutely ... On Sunday, April 17, over two-thirds of the representatives in the lower chamber of Brazil’s Congress voted in favor of impeaching President Dilma Rousseff. The president is accused of poor administration and manipulating government accounts ... https://www.brookings.edu/research/april-2016-update-to-tiger-tracking-indexes-for-the-global-recovery/April 2016 update to TIGER: Tracking indexes for the global recoveryhttp://webfeeds.brookings.edu/~/172289538/0/brookingsrss/topics/emergingmarkets~April-update-to-TIGER-Tracking-indexes-for-the-global-recovery/
Sun, 10 Apr 2016 04:00:00 +0000http://www.brookings.edu?p=94722&post_type=research&preview_id=94722Financial Times TIGER index reveals that the global economic recovery remains weak, uneven, and in danger of stalling yet again.

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Editor’s Note: In collaboration with the Financial Times (FT), Eswar Prasad and Karim Foda of Brookings have developed a set of composite indexes which track the global economic recovery. The Financial Times also publishes the Tracking Indexes for the Global Economic Recovery (TIGER), which appears on the Financial Times website.

After yet another year of tepid growth in 2015, the world economy in 2016 faces the unsettling prospect of more of the same—at best. It continues to be beset by mediocre growth, hesitant or impotent policy actions by national governments, and a dearth of confidence among households and businesses.

The latest update of the Brookings-FT TIGER shows that the global economic recovery remains weak, uneven, and in danger of stalling yet again. Click a country name below the overall growth index to view charts for the main TIGER indexes by country and charts for the indicators that make up the indexes, which are broken down by real activity, financial, and confidence indicators.

Indices developed by Eswar Prasad and Karim Foda, The Brookings Institution, October 2016

As well as tracking country performance, the TIGER indexes also track the performance of key indicators across groups of advanced economies, emerging markets and a composite total. Click on the following links to view the updated charts for the following key indicators:
Real Activity IndicatorsFinancial IndicatorsConfidence Indicators

For detailed information on the composition and construction of the indexes and a comprehensive description of the data and source information, please refer to the updated technical appendix. Data for the TIGER indexes are available for download below and on the right column of this page.

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Editor's Note: In collaboration with the Financial Times (FT), Eswar Prasad and Karim Foda of Brookings have developed a set of composite indexes which track the global economic recovery. The Financial Times also publishes the Tracking Indexes for the Global Economic Recovery (TIGER), which appears on the Financial Times website.
After yet another year of tepid growth in 2015, the world economy in 2016 faces the unsettling prospect of more of the same—at best. It continues to be beset by mediocre growth, hesitant or impotent policy actions by national governments, and a dearth of confidence among households and businesses.
The latest update of the Brookings-FT TIGER shows that the global economic recovery remains weak, uneven, and in danger of stalling yet again. Click a country name below the overall growth index to view charts for the main TIGER indexes by country and charts for the indicators that make up the indexes, which are broken down by real activity, financial, and confidence indicators.
Greece Ireland Netherlands Portugal South Korea
Country
Overall Growth Index
- Advanced Economy - Emerging Market Economy - Euro Periphery Economy - Euro Periphery / Advanced Economy
Learn more about the recovery in advanced and emerging markets (PDF)
Indices developed by Eswar Prasad and Karim Foda, The Brookings Institution, October 2016
As well as tracking country performance, the TIGER indexes also track the performance of key indicators across groups of advanced economies, emerging markets and a composite total. Click on the following links to view the updated charts for the following key indicators:
Real Activity Indicators
Financial Indicators
Confidence Indicators
For detailed information on the composition and construction of the indexes and a comprehensive description of the data and source information, please refer to the updated technical appendix. Data for the TIGER indexes are available for download below and on the right column of this page.
Read the full analysis and commentary: A recovery of sorts could prove fragile and fleeting » Editor's Note: In collaboration with the Financial Times (FT), Eswar Prasad and Karim Foda of Brookings have developed a set of composite indexes which track the global economic recovery. The Financial Times also publishes the Tracking Indexes for ...